Question

When Dave and his friend sit down to rewrite the budget, how realistic is it? Could the budget be balanced and changed that easily? Why or why not? Why do we need a balanced budget?

Answer 1

1. It is not realistic to rewrite the budget to balance it unless there was the padding of the initial draft of the budget with in-built cushions.

 

2. A budget could not be easily balanced and changed unless it is still in the draft stage. Once a budget is approved, the budget holders perform within the budget constraints.

 

3. Whether a budget variance is favorable or unfavorable, some significant variances require investigation to discover the causes and enable remedial actions.

 

4. Thus, a balanced budget shows that the expenditures and revenues during the budget period are equal. A balanced budget is not always realistic.

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